Tesla announces global adoption of lithium iron phosphate batteries

On October 20th, US time, Tesla released its third-quarter financial report for fiscal year 2021, with total revenue of US$13.757 billion, a year-on-year increase of 57%; net profit of US$1.618 billion, a year-on-year increase of 389%; the gross profit margin of the automotive business was 30.5%, a new high.

Not only did Tesla achieve its best net profit, operating profit and gross profit in history, it also announced a major news on the same day - all standard range electric vehicles worldwide are switching to lithium iron phosphate batteries .

Based on this, Tesla expects deliveries to grow by an average of 50% per year in the next few years.

It has to be said that this is a really smart idea, because without lowering the price, Tesla is likely to increase its profit margin. At the same time, this also means that the lithium iron phosphate technology route has been further recognized by Tesla.

Long-standing preparation

In the Chinese market, in July last year, CATL entered the domestic Tesla Model 3 supply chain with its lithium iron phosphate batteries ; in July this year, Tesla, having tasted the sweetness of low prices, continued to use lithium iron phosphate batteries on the Model Y standard range version , and also signed a new battery supply contract with CATL.

Tesla has already started testing the waters in overseas markets. At the end of August, users in the United States who had reserved the standard range-enhanced version of the Model 3 received an email saying that if they wanted to get the car in advance, they could choose lithium iron phosphate batteries, and that lithium iron phosphate battery models were also available in the U.S. inventory.

Musk himself later publicly stated that he prefers lithium iron phosphate batteries. He said: This is because lithium iron phosphate batteries can be charged to 100%, while ternary lithium batteries are only recommended to be charged to 90%.

Even earlier in the second quarter earnings call, Musk announced that two-thirds of Tesla's future batteries will use lithium phosphate batteries and one-third will use nickel batteries.

Now, the latest news confirms this change.

It can be seen that Tesla has been planning to adopt lithium iron phosphate batteries worldwide for a long time. After all, the frequent price changes of vehicle models have accumulated a lot of complaints. Switching to lithium iron phosphate batteries can perfectly solve the contradiction between cost, selling price and profit margin.

Lithium iron phosphate surpasses ternary

Since the beginning of this year, affected by the battery technology route choices of automobile companies, the installed capacity of lithium iron phosphate batteries has continued to rise.

In addition to Tesla, the world's leading new energy automaker, Volkswagen revealed at its first "Power Day" on batteries this year that lithium iron phosphate batteries will be one of the main battery routes for its platform models in the future; Hyundai Motor also recently announced the launch of lithium iron phosphate battery models worldwide.

In addition, technology giant Apple, which plans to launch an electric car in 2024 , will also use lithium iron phosphate batteries, citing safety reasons.

The choice of car companies is the best indicator, indicating that the future prospects of lithium iron phosphate batteries are very bright.

According to data released by the China Automotive Power Battery Industry Innovation Alliance ("Battery Alliance"), China's power battery production totaled 23.2GWh in September 2021, a year-on-year increase of 168.9%. Among them, the output of ternary batteries was 9.6GWh, accounting for 41.6% of the total output, a year-on-year increase of 102.6%; the output of lithium iron phosphate batteries was 13.5GWh, accounting for 58.3% of the total output, a year-on-year increase of 252.0%.

This is the fifth consecutive month that the output of lithium iron phosphate batteries has exceeded that of ternary batteries, and the output gap between lithium iron phosphate batteries and ternary batteries has further widened: in August, the market share of lithium iron phosphate batteries exceeded that of ternary batteries by nearly 14 percentage points; in September, it had reached nearly 17 percentage points.

In the first three quarters (January-September), the cumulative output of ternary batteries was 62.8GWh, accounting for 46.6% of the total output; the cumulative output of lithium iron phosphate batteries was 71.6Wh, accounting for 53.2% of the total output.

In the first three quarters, the market share of lithium iron phosphate battery production exceeded that of ternary battery production by 6.6 percentage points.

The same is true for sales . In September, ternary battery sales were 7.6GWh, accounting for 42.9% of total sales; lithium iron phosphate battery sales were 10.1GWh, accounting for 56.9% of total sales.

In the first three quarters, the cumulative sales of ternary batteries reached 49.3GWh, and the cumulative sales of lithium iron phosphate batteries reached 56.7GWh.

Obviously, the sales volume of lithium iron phosphate batteries also far exceeds that of ternary batteries.

In terms of installed capacity, in the first three quarters, the installed capacity of ternary batteries totaled 47.1GWh, accounting for 51.2% of the total installed capacity, a year-on-year increase of 99.5%; the installed capacity of lithium iron phosphate batteries totaled 44.8GWh, accounting for 48.7% of the total installed capacity, a year-on-year increase of 332.0%. It can be seen that the installed capacity of lithium iron phosphate batteries in the first three quarters was 2.3GWh less than that of ternary batteries.

However, the installed capacity of lithium iron phosphate batteries (13.5GWh) in September was 3.9GWh more than that of ternary batteries (9.6GWh). It can be predicted that the installed capacity of lithium iron phosphate batteries may surpass that of ternary batteries in all aspects from January to October.

Based on the above data, lithium iron phosphate batteries will surpass ternary batteries in terms of production, sales, installation volume, year-on-year growth rate, etc.

Who is the "Second Brother"

Tesla's performance in production and delivery was equally impressive in the third quarter of this year. It produced a total of 237,800 new vehicles and delivered a record 241,300 vehicles, including 232,000 Model 3 and Model Y.

From the above data, we can see that more than 96% of Tesla's sales in the third quarter came from Model 3 and Model Y, which are undoubtedly the main sales models. At the same time, Tesla has announced that the standard range version of the car will switch to lithium iron phosphate batteries worldwide. Presumably, the sales of Model 3 and Model Y will reach a new level.

While sales are rising steadily, it is necessary to ensure a stable supply of power batteries.

Currently, Tesla purchases lithium iron phosphate batteries from CATL, but for Tesla, in order to ensure the security of the supply chain, it generally does not use lithium iron phosphate batteries from only one supplier.

There have been different reports about the list of the second supplier. In addition to BYD , which is very likely , LG Energy, one of Tesla's ternary battery suppliers, is also working hard on it.

Earlier, there were reports that BYD and Yiwei Lithium Energy would supply batteries to Tesla, which Yiwei Lithium Energy denied. BYD responded by saying that it had never told the media that it would supply blade batteries to Tesla , nor did it say that blade batteries would be used in Model Y.

Some people believe that “not disclosed to the media” does not mean that the blade battery is outside Tesla’s battery suppliers.

In addition, industry media recently reported again that Tesla's models will use BYD batteries next year.

As for LG Energy, it began developing lithium iron phosphate battery technology at its Daejeon laboratory in South Korea at the end of last year, and hopes to build a pilot line as early as 2022.

It will be worth looking forward to who will become Tesla’s second lithium iron phosphate battery supplier after CATL!